United Kingdom Inflation

United Kingdom: Inflation continues to advance

September 13, 2011

In August, consumer prices rose 0.6% over the previous month, contrasting the flat reading tallied in July. Most of the upward pressure came from increasing clothing and footwear prices, as well as from rising prices in the transport category. As a result, annual headline inflation inched up from 4.4% in July to 4.5% in August, which was in line with market expectations. Inflation in the U.K. remains relatively high by historical standards and well above the Bank of England's target of 2.0%. According to the Bank of England, however, the elevated inflation rate mainly stems from higher global commodity prices and from January's VAT rate hike. According to its August Inflation Report, the Bank of England projects inflation to average 4.6% this year before moderating to 3.1% in 2012.

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